Fast-casual restaurants will generate $10 billion in restaurant sales in 2007, said Tim Pulido, chief executive officer of Shakey’s USA. Of that $10 billion, the top 10 chains will contribute an estimated $6.6 billion, while the remaining will contribute about $3.4 billion.
Quick-serve and casual-dining restaurants both will contribute more than $170 billion in sales, Pulido said.
Pulido was the keynote speaker at the 2007 Fast Casual Executive Summit, held Sept. 18-19 at the Hotel Palomar in Dallas.
To kick off Summit festivities, Pulido delivered the address, “Innovative Tactics for Growth: Lessons Learned on the Front Lines.”
More than 70 attendees experienced two days of industry collaborative sessions, along with a networking and dinner event at the five-star restaurant, Central 214.
Summit attendees included representatives from Sizzler, Penn Station East Coast Subs, Ellianos Coffee Company, Au Bon Pain, Spicy Pickle, McAlister’s Deli, Raving Brands, Which Wich, Saladworks, Sandella’s Flatbread and Gold Star Chili.
To articulate a fast-casual brand, Pulido said four building blocks must exist: brand strategy, identity, management and experience.
“Once the roadmap is laid out, then you can start distilling where the brand will move,” he said. “You have to define the who, why, when and where; then you define the how and all of those things become the what.”
Knowing your brand includes competitive mapping, defining the axis (kid friendly vs. adult focused) and finding a position in the marketplace.
“Ultimately, you want a relevant, impactful and consistent brand experience,” he said.
Pulido stressed Summit attendees should drive operation-growth in three ways:
- Focus on consumer insights, not just consumer trends
- Clearly differentiate your brand
- Ask who, why, when, where and how before developing the what
Industry awareness and effective marketing
Pulido’s presentation was followed by the Summit’s first collaborative session, “Industry Awareness & Strategic Planning,” led by Fast Casual magazine publisher and Summit chairman Paul Barron.
“Very few people understand the passion behind the restaurant business,” Barron said. “The biggest value is interacting with each other.”
At the start of his session, Barron posited three roundtable questions for Summit attendees:
- What things are you doing right now that raise the quality of the consumer experience?
- What are you doing to raise awareness to the consumer about how you are different?
- What steps do you take to identify consumer trends inside your operation?
Barron said the fast-casual segment was created because of consumer demand, social trends and the evolution of quick-serve restaurants and casual-dining chains. Further, consumers’ shift to a time-compressed state also has impacted the restaurant industry, he said.
“Understanding time compression is the key to unlocking future consumer behavior,” Barron said. “It’s clear that future lifestyles will stress time and convenience.”
Understanding consumer tastes was a concurrent theme throughout the Summit.
Marketing expert Linda Duke expressed surprise during her session, “Innovations for Marketing & Branding a Fast Casual Restaurant,” at the percentage of fast-casual operators who do not conduct customer surveys.
Duke referenced The 2007 Fast Casual State of the Industry Report.
In the report, 42.5 percent of fast-casual executives surveyed said they do not conduct surveys. Twenty percent said they conduct surveys on an annual basis, while 7.5 each conduct surveys monthly and weekly. Only 5 percent conduct surveys quarterly.
Duke said effective restaurant marketing doesn’t happen “in a vacuum” and that due diligence must be performed to have an effective restaurant marketing effort.
Operators also need to target two “ignored” demographic consumers: Generation X (18- to 32-year-olds) and baby boomers, she said.
“Boomers and Generation X both are areas of opportunity,” Duke said. “Surveys and focus groups to get a bigger share of these demographics will increase sales.”
To target Generation X consumers, Duke said operators should look toward e-mail, blog and text-messaging marketing tactics. Additionally, she said operators should put their food in locations where Generation X is: universities, health clubs and soccer fields.
Marketing to baby boomers is at the opposite end of the spectrum.
Boomers are looking for special invitations in the form of direct mail. They also want an offer of something – such as dessert – at no extra charge.
“Communicate the higher quality and healthy messages,” Duke said to further target the baby boomer crowd.
Employee retention and brand expansion
One big Summit focus was employee retention.
Human resources expert Rudy Miick said employees should make eye contact and smile every time they are within five steps of a customer. Additionally, he said operators should look at themselves as coaches rather than as cops when it comes to dealing with employees.
“It comes down to relationships,” Miick said. “Focus on the healthiness of relationships and attitude.”
Miick’s collaborative, “Recruiting and Retaining Passionate People,” offered insights into successful employee-hiring and retention practices.
Miick cited the Fast Casual State of the Industry Report which showed 45.2 percent of respondents have a turnover rate in excess of 30 percent.
“My question for you is, ‘Are these folks growing while they’re with you?'” Miick said.
Miick also highlighted the report’s finding that 61.9 percent of survey respondents said it cost less than $500 to replace an employee. Miick said the real question is ‘What is the cost to lose one?’
From a quick-serve restaurant viewpoint, the fast-casual segment has created a consumer touchpoint through innovative concepts, menus and designs and the use of higher-quality food, said Pattye Moore, former president of Sonic Corp.
Moore led the final collaborative session, “New Frontiers in Expanding & Franchising Your Brand.”
“Fast casuals have created a very unique niche that consumers have responded to,” she said. “You are redefining, in fact, a lot of QSR and a lot of casual dining (trends).”
Moore also focused on report responses, drawing attention to the fact that 50 percent of respondents do not franchise and another 89 percent do not plan to grow internationally.
Some of the industry’s growth issues, such as higher real estate costs and employee recruitment, could be a factor in respondents’ hesitancy, but there are ample opportunities for growth, Moore said.
For those concepts where growth is the next step, Moore recommended a few options:
- Grow by building sales at existing restaurants
- Open more company-owned locations
- Franchise
- Seek nontraditional avenues to build the brand
“Growth provides opportunities for employees, helps build the brand and gives consumers more avenues and opportunities to experience the brand,” she said. However, “growth for growth’s sake usually fails.”
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